How could the luxury brands improve their visibility and awareness in Latin America by focusing on their digital distribution and communications?

LAURE DES LYONS

The added value of digital for luxury brands in Latin America

q  EXECUTIVE SUMMARY

q  THE IMPORTANCE OF THE LUXURY INDUSTRY IN LATIN AMERICA

q  FOCUS ON A FAST GROWING EMERGING MARKET: MEXICO

q  STRATEGIES : DIGITILIZATION OF THE DIFFERENT POINTS-OF-SALE AND

COMMUNICATIONS DEVICES

q  CONCLUSION

q  BIBLIOGRAPHY

CONTENT

EXECUTIVE SUMMARY

In the recent years, the Western luxury brands hold fast growing investments in the Latin American region and are likely to increase their presence, especially in Mexico.

With the economic crisis in 2008 that had struck the Western World, they are now turning their investments towards emerging countries. Western luxury brands increase their revenues in those dynamic countries where middle class populations are on the rise. The Latin American region is one of the emerging countries where the Western luxury brands are seeking opportunities outside their traditional markets (Europe, USA).

Among the different countries in Latin America, Mexico and Brazil are the two which have the strongest economic growth in the luxury industry. Some recent studies demonstrate that Mexico is becoming the first country with an annual growth of 12% if we include the automobile and aeronautic industries. Even though there are inequalities in Mexico, this country is at the crossroads between Europe, Americas and Asia which supports the settlement of Western groups. In 2013, according to a PwC study, Mexico counts 400 French firms established in the country. With the enrichment of the population, Western luxury groups try to gain recognition among those new emerging countries.

To build their reputation, they must adopt a strategic and marketing communications plan in line with the local culture. The digital will therefore have a strong influence in the strategy of the marketing communications plan as almost every emerging country uses the new means of innovation to open itself in a more internationalized context. Mexico will become more global because of new technologies of information. Furthermore, incorporating digital in its marketing communications strategy help the Western luxury brands to inform, educate about their heritage, tradition, know-how and gain the awareness of the community. The first one to adapt their strategies will have the benefit of the long-term reputation and return on investment.

Main reasons of the growth of the luxury goods

Ø  Rise of the middle class and increase of the number of billionaires and millionaires

Ø  Access to credit for most of the middle class

Ø  Increase in the use of credit cards

Ø  Advances in banking

Ø  Status symbol very important

Ø  Values of self and individualization

Ø  An appearance society

Ø  A consumerism society

New characteristics of the Latin American consumers

In this context, according to a global analysis on the luxury industry by Bain & Company (May 2013), this sector has an annual growth of 15% in Latin America, especially supported by Brazil and Mexico.

THE IMPORTANCE OF THE LUXURY INDUSTRY IN LATIN AMERICA

The worship of the European luxury goods

Ø  Access to higher quality of materials and craftsmanship

Ø  Be part of a dream and the heritage

Ø  Synonym of the most innovating products

Ø  Synonym of modernity

According to Ipsos Marketing in 2008, 76% of people in Mexico considered that luxury is the most advanced product in terms of innovation.

According to the online magazine PORTADA, Sephora and Salvatore Ferragamo announced expansion planed in the LATAM region in 2013. Sephora opened 12 to 13 stores in LATAM.

Ø  Multi department store chains such as Palacio de Hierro, Liverpool, Paseo Interlomas, Antara Fashion Hall, Centre commercial Santa Fe which are represented as a manner of lifestyle for the Mexicans

Ø  American department stores such as Saks Fifth Avenue in Santa Fe y Plaza Carso

Ø  The famous “Avenida Mazaryk”

A large distribution environment in Mexico City

Including the automotive and aeronautic sectors, Mexico is the first luxury market in the Latin American region. In 2012, Mexico has realized 55% of sales of the luxury products in Latin America. And, according to the Boston Consulting Group (2013), the luxury market in Mexico has 12% of annual growth.

Ø  Since 2000, Mexico has adopted the liberal exchange treaty between the European Union and Mexico which allows zero taxes of customs duties for the export of European products

A liberal country open to trade

Ø  Strategically positioned between North and South America

Ø  Strong influence of the United States, which has an avant-gardist position in terms of digital communications

The central position of the country in Americas

A KEY EMERGING COUNTRY IN LATIN AMERICA: MEXICO

Ø  Show an i ndependen t s t y l e wh i ch differentiate them

Ø  A hedonist attitude Ø  Fascinated by European luxury goods

Mexican luxury consumers

The luxury industry in Mexico per sector:

Ø  In 2012, the Mexican cosmetics industry reached 6% of growth representing 14 billions dollars

Ø  Most renowned brands in Mexico: Arabela, Creaciones Iguazu, Johnson & Johnson, l’Oreal, l’Occitane, Sephora, Yves Rocher etc.

An important market for the cosmetic industry

Ø  Promote the Mexican culture and educate about tradition

Ø  Demonstrate the artistic culture Ø  Show the recognition of its luxury know-how

worldwide

Local fashion brands: A well-known brand, Pineda Covalin

A KEY EMERGING COUNTRY IN LATIN AMERICA: MEXICO

*Source : ie Observatorio del Mercado Premium y de Productos de Prestigio, August 2013

Since 2000, the digital revolution spreads out over the world. It is now completely part of our way of life and of the economy. The difficulty for the exported Western luxury brands in emerging countries is to gain recognition. By incorporating the technological advances coupled with understanding of the local culture, their reputation should certainly gain more recognition in the market.

Ø  Facebook is the number one among the social networks in Latin America

Ø  62% of Mexicans are fans of a luxury brand on Facebook. (“like”)

Ø  The importance of the Internet as an information channel for the Mexicans Magazines websites, and, secondly, brand websites are the sites chosen to find out about new collections, trends or brands

Ø  78% of luxury customers in Mexico use the Internet to be informed

The digital culture of the Mexicans

STRATEGIES: DIGITILIZATION OF THE DIFFERENT POINTS-OF-SALES AND COMMUNICATIONS

DEVICES WITH A FOCUS ON MEXICO

Ø  Digital communications tools such as the tablets, smartphones or websites help to highlight the brand heritage, history culture, the iconic products by diving customers into an immersive experience

Ø  Better control of their products, customers and market thanks to technological devices provide data information of the market

Ø  The digital emphasize people’s emotions and aspirations

Ø  The digital personnalizes the customer’s experience and creates a positive shopping experience

Ø  It encourages the local consumption of luxury products

Ø  Influence social changes if their digital c ommunca t i o n s i n c o r po ra t e s p o r t s partnerships. This will foster brand awareness and a sense of community citizenship

The power of digital

Examples of digital innovation on mobile devices: the digitilization of the loyalty card and mobile phone as a new means of payment credit card.

The purchase of luxury goods over the Internet in Mexico per sector:

Ø  Even though some purchases are done through the Internet (smartphones, laptops, tablets…), the Internet is currently regarded as a means to be informed more than a shopping channel. Nevertheless, in the coming years, some changes will certainly appear.

STRATEGIES: DIGITILIZATION OF THE DIFFERENT POINTS-OF-SALES AND COMMUNICATIONS

DEVICES WITH A FOCUS IN MEXICO

*Source : ie Observatorio del Mercado Premium y de Productos de Prestigio, August 2013

Ø  The digitilization of the mono-brand store (or e-retail store) is very important in a way to create a contact point with the digital ecosystem

Ø  The ID product and the ID customer should be respectively the same in the different points of retail stores and online supports. This will lead to a better cross-canal management of the client

Ø  Use e-Magazines and local print-magazines to communicate

Ø  Communicate on the social networks locally Ø  Develop applications both on tablets and

smartphones such as CRM (customer-relationship-management) in-store which help to identify the customer when he/she enters in the shop and then a personal shopper will be sent to his/her smartphone

Ø  Create an e-commerce website to broaden the reach of the luxury goods in the Latin American region

Incorporate the digital both online and off-line

Ø  I n t e g r a t e l o c a l s y m b o l s i n t o t h e communications in a way that the local customers will reflect its liflestyle into the luxury products. See below an example of Jaeger LeCoultre (Grande Reverso 976) for the commemoration of the artist Guillermo Ceniceros

Ø  Use the storytelling as a brand content

Different means of communication to broaden the reach of Western luxury goods abroad

STRATEGIES: DIGITILIZATION OF THE DIFFERENT POINTS-OF-SALES AND COMMUNICATIONS

DEVICES WITH A FOCUS IN MEXICO

Example of Bourjois Paris which used both the distribution sector with Liverpool and a massive advertising campaign on different social networks to conquest the Mexican market in 2012.

*Source : Se développer et investir au Mexique, les opportunités d’affaires, PwC, 2013

CONCLUSION

In the recent years, Western luxury groups have leveraged their operations revenues with the emerging markets by seeking new customers who are more willing to acquire those iconic products. This population has a more hedonist attitude which triggers the consumption. The dynamic growth of those countries have seen the emergence of a rich population, with more and more potential buyers.

Mexicans have a fascination for European luxury brands because they represent innovation, modernity, perfection and “Latin” heritage. In the coming years, we will see more and more European luxury groups in Mexico.

Mexico is characterized by large social inequalities. This is why it is important for Western luxury brands to think carefully in which ways they could gain the recognition of the local population.

Thus, the settlement of those Western luxury brands need to follow a strategic marketing communications plan by incorporating the digital tools. This study has shown the power of the digital in distribution and communications which should not be neglected.

In the coming years, this trend is likely to continue among Western luxury groups because it has demonstrated a good manner to conquest those new markets.

Laure des Lyons lauredeslyons@gmail.com

http://www.linkedin.com/in/lauredeslyons

•  Le luxe est synonyme d’innovation dans les pays émergents, emarketing.fr, IPSOS 2008.

•  Living luxury in emerging markets, N°19, IFOP 2011.

•  Les valeurs du luxe se déclinent sur le digital, Marketing Magazine, Novembre 2013.

•  Luxury goods: A « new » trend in Latin America?, Portada, May 2013.

•  Se développer et investir au Mexique, les opportunités d’affaire, PwC, 2013.

•  Jaeger Lecoultre, édition spéciale Mexique, cours Sciences Politiques Paris, Victoire de Maismont and co, 2013.

•  Le marché du luxe au Mexique, cours Sciences Politiques Paris, Kimm Garcia Roca, 2013.

•  Le luxe international : L’Amérique Latine, cours Sciences Politiques Paris, Maité Issa et Victoire de Maismont, 2013.

•  Importance of the Internet for consumers of Premium and Luxury Products in Mexico, Obervatorio del Mercado Premium y de Productos de Prestigio, August 2013.

•  Présentation sur le Mexique, Export Champagne-Ardennes.

•  How to preserve prestige in your digital strategy?, Web & Luxury, The luxurious Magazine, July 2013.

•  Focus sectoriel/pays: Le marché du luxe au Mexique, Delphine Robin, February 2013.

•  Mexico offers a fully baked emerging market: real estate exec, Luxury Daily, May 2014.

•  Sport partnerships foster organic brand communities in Mexico, Luxury Daily, May 2014.

•  Social media needs to be organic to succeed, Luxury Daily, May 2014.

•  How mobile is transforming the retail industry in stores and online, Luxury Daily, May 2014.

•  Estée Lauder chairman: Focus expansion efforts on where the future might be, Luxury Daily, May 2014.

•  Christian Louboutin: Personnel, education key to entering emerging markets, Luxury Daily, May 2014.

BIBLIOGRAPHY